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April 23, 2008

Scalping - When Is The Best Time Of The Day To Scalp The Forex Markets?

Scalping can mean different things to different traders, but I personally take scalping to mean very short-term trading, ie trades generally last just a few minutes and no longer than about an hour at most.

Most of my trades last longer than this, but saying that I do still dabble in very short-term trades occasionally and generally do okay, although it is slightly more stressful and you do need quick fingers at times.

However, what I've noticed is that there is definitely one period of the day that is a lot more predictable, and therefore profitable, and that is the start of the London trading session between 8.00 and 9.00 UK time.

I first noticed this when trading the FTSE because having always made pretty good profits trading this index between 8.00 and 9.00, I also noticed that the major European currency pairs like the GBP/USD and the EUR/USD also behaved in a similar way.

This opening hour usually tends to set the trend for the day and as a result you often see strong sustained moves during this hour. Traders start off the day by following the initial direction of the trend and you get decent sized moves without the whipsaws you often get during the rest of the day.

To demonstrate this point, take a look at the 5 minute chart of the EUR/USD for the last two days. I would add charts here but they use up a lot of bandwidth, so to do it yourself add the following indicators: MACD, TRIX, Stochastic (8,3,3), RSI and CCI.

On Tuesday (22/4), you will see that all of these indicators went into oversold territory just before 8.00. Then between 8.05 and 8.10 the CCI crossed upwards through the -100 level and the other indicators followed suit with the MACD and TRIX crossing upwards to mark the start of an upwards trend. This strong opening trend yielded around 30 points, depending on your exact entry and exact points.

It was a similar story on Wednesday (23/4) when the EUR/USD was oversold on the 5 minute chart from about 6.25 onwards. However during the profitable 8.00-9.00 opening hour, the price rose and the indicators emerged out of oversold territory with CCI and Stochastic rising and MACD crossing upwards around 8.30. This could have yielded anything up to 40 points, and even if you'd joined the party late at around 8.35, you still could have netted around 15 points.

These strong moves during the busy opening hour are extremely common, and while you don't get good set-ups like these on the same pair every single day, there is nearly always one major pair that you can take advantage of during this hour.

There are of course times when the opening hour is uneventful or a trade goes against you as no trading method's perfect but the period between 8.00 and 9.00 UK time is definitely the best time to scalp the markets in my experience, particularly if you only ever trade high probability positions like the two examples mentioned previously.

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October 29, 2009

Very good tips, indeed. I'm scalping forex for year and half with some success. To be honest I am not genius but I am learning and beleive that it is possible to make some serious profits with scalping techniques.

I am just curious are other people successful on 15 minute chart… do you have expirience with it or use just 1 and 5 minute charts?

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